Government measures to transition to an environmentally cleaner future, tax incentives, and the impressive features of electric cars, such as quick acceleration, longevity, and accessibility have been aiding EVs’ drive to replace fossil fuel-powered vehicles. More than 50 new electric cars, trucks, vans, and SUVs have been announced to arrive by 2024 and beyond.
However, expensive battery technology, insufficient charging stations, a semiconductor chip shortage, and rising input prices pose significant challenges to the EV industry.
So, we think it could be wise to avoid electric vehicle stocks Lucid Group, Inc. (LCID), NIO Inc. (NIO), and Li Auto Inc. (LI), which are currently trading at price levels that don’t justify their fundamentals and growth prospects.
Lucid Group, Inc. (LCID)
LCID is a Newark, Calif.-based manufacturer of EVs (EVs). The company designs, engineers, and builds EVs, EV powertrains, and battery systems. Its Lucid application provides an in-car experience. LCID also offers Air Dream Edition, Air Grand Touring, Air Touring, and Air Pure.
Last month, The Schall Law Firm, a national shareholder rights litigation firm, commenced investigating claims on behalf of investors of LCID regarding alleged violations of the securities laws. The investigation focuses on whether LCID issued false and misleading statements and failed to disclose information pertinent to investors. The case has the potential to negatively impact LCID’s investors.
For the third quarter, ended Sept. 30, 2021, LCID’s revenue decreased 30.5% year-over-year to $232,000. The company’s negative gross profit increased 1,022.9% from the year-ago value to $3.09 million. Its total operating expenses rose 205.2% from the prior-year quarter to $493.96 million. Also, the company’s loss from operations increased 206.6% year-over-year to $497.05 million.
LCID’s EPS is estimated to decrease 38.7% per annum over the next five years. Its stock has declined 14.8% in price over the past month.
In terms of forward Price/Book, LCID is currently trading at 14.05x, which is 302.9% higher than the 3.49x industry average. In addition, in terms of forward Price/Sales, LCID is currently trading at 945.8x, which is 78,143.1% higher than the 1.21x industry average.
It is no surprise that LCID has an overall F rating, which equates to a Strong Sell in our POWR Rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. Also, the stock has an F grade for Value, Quality, and Stability.
NIO Inc. (NIO)
Headquartered in Shanghai, China, NIO designs, develops, manufactures, and sells smart electric vehicles in China. The company’s NIO Power provides mobile internet-based power solutions for battery charging and battery swap facilities. NIO markets and designs technology development activities, and manufactures e-powertrains, battery packs, and components.
For the third quarter, ended Sept.30, 2021, NIO’s total revenues increased 116.6% year-over-year to RMB9.81 billion ($1.54 billion). However, the company’s total operating expenses grew 94.9% from its year-ago value to RMB2.99 billion ($468.23 million). Its net loss amounted to RMB835.3 million ($131.02 million). And its loss from operations grew 4.9% from the year-ago value to RMB991.93million ($155.56 million).
NIO has failed to beat the consensus EPS in three of the trailing four quarters. And analysts estimate NIO’s EPS will decline 5.5% in its fiscal 2021. The stock has declined 41.7% in price over the past six months and 42% over the past year.
In terms of forward Price/Sales, NIO is currently trading at 8.23x, which is 580.5% higher than the 1.21x industry average. In addition, its 11.35x forward Price/Book is 225.3% higher than the 3.49x industry average.
NIO’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to a Sell in our proprietary rating system. Also, the stock has an F grade for Stability and a D grade for Value and Quality. We have also graded NIO for Growth, Momentum, and Sentiment. Click here to access all of NIO’s ratings. NIO is ranked #53 in the Auto & Vehicle Manufacturers industry.
Li Auto Inc. (LI)
Formerly known as Lead Ideal Inc., LI is a Beijing, China-based new energy passenger vehicles (NEV) automaker that designs, develops, manufactures, and sells smart electric vehicles. The company also offers Li ONE, a six-seat electric SUV equipped with a range of extension systems and smart vehicle solutions.
LI’s total revenues increased 209.7% year-over-year to RMB7.78 billion ($1.22 billion) in the third quarter, ended Sep. 30, 2021. However, the company’s total operating expenses grew 182.2% from its year-ago value to RMB1.91 billion ($299.4 million). Its loss from operations came in at RMB97.8 million ($15.33 million).
Also, the company’s net loss amounted to RMB21.51 million ($3.38 million).
In terms of forward EV/Sales, LI is currently trading at 5.71x, which is 305.2% higher than the 1.41x industry average. In addition, its 6.97x forward Price/Sales is 476.5% higher than the 1.21x industry average.
LI’s shares have declined 15.5% in price over the past six months and 10.6% over the past year.
LI’s poor prospects are also apparent in its POWR Ratings. The stock has an overall D rating, which equates to Sell in our proprietary rating system. Also, the stock has a D grade for Value and Stability.
In addition to the POWR Rating grades I have just highlighted, one can see LI’s ratings for Sentiment, Growth, Quality, and Momentum here. LI is ranked #39 in the Auto & Vehicle Manufacturers industry.
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LCID shares were trading at $39.94 per share on Friday morning, up $1.72 (+4.50%). Year-to-date, LCID has gained 4.97%, versus a -1.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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